With the sluggish economy and the extensive rebuilding along the East Coast as a result of Hurricane Sandy, construction workers are traveling far and wide to find jobs and take advantage of temporal opportunities. While these workers are generally allowed to deduct their travel expenses, there are plenty of traps for the unwary at both the federal and state levels, explains Bloomberg BNA's Melissa Fernley in this week's issue of the Weekly State Tax Report.
Beyond the physical and emotional demands of working away from home, construction workers must also consider the tax implications of earning income away from their tax home. While in theory the expenses incurred during temporary employment are deductible from individual income, the Internal Revenue Service and the courts have created several stumbling blocks that require the taxpayer to pay close attention to the duration and location of temporary work.
Most states follow the I.R.C. in providing that travel expenses are fully deductible if they are incurred while "away from home" in the pursuit of business. However, in a recent Oregon decision, a husband and wife, both working in construction and each with employment lasting less than a year, were treated differently by the state's Tax Court.
The wife was denied the deduction on the grounds that she had a "reasonable probability" of continued employment in the Portland area and should have moved closer to her work in order to avoid travel expenses. In contrast, the husband's lack of prospects for continued employment justified treating their personal residence as his tax home, with the court allowing his deductions.
For a complete analysis of the Oregon decision, along with a look at each state's business deduction regime, check out Fernley's article, which can be read in its entirety here.
In other developments…
South Dakota, Utah Joining Rush for the Exits at the Multistate Tax Commission , according to the Tax Foundation.
FY 2014 Proposed Budgets & Prior Enacted Budgets , by The National Association of State Budget Officers.
Federal Grants to State and Local Governments , by the Congressional Budget Office.
Weekly Map: State and Local Sales Tax Rates, 2013 , by Nick Kasprak of the Tax Foundation.
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